Comment of the Day
Video commentary for October 31st 2022
Some of the topics discussed include: India continues to outperform China by a wide margin but China is very oversold, Brazil bounces following Lula victory, Dollar firms, bonds yields rise, Wall Street pauses.
GameStop, Getty Images Surge as Meme and De-SPAC Frenzy Returns
This article from Bloomberg may be of interest to subscribers. Here is a section:
“The first thing you have to realize with these stocks is there’s no rhyme or reason,” said Keith Lerner, chief market strategist at Truist Advisory Services Inc. “They don’t trade based on the big macro trends normally. They trade on speculation and liquidity.”
A basket of so-called meme stocks tracked by Bloomberg rose 1.4%, while the De-SPAC index is lower by about 0.2%. Both gauges have plunged this year as concerns about a possible US recession diminished investor demand for shares of riskier assets.
The sudden resurgence in interest for the group comes ahead of what is likely to be a bumpy two weeks for the stock market. A Federal Reserve rate decision on Wednesday will kick off a span of seven trading sessions that will feature four major events including a key jobs report, mid-term elections and inflation data for October.
Eoin Treacy's view - Let’s set rationale aside for the present and think instead about what kind of message this spike in speculative activity says about how much liquidity is still in the market. In nominal terms, consumer spending is way above trend. Adjusted for inflation it is back on trend.
This section continues in the Subscriber's Area.
Wheat Surges as Russia Warns on Ship Safety After Ditching Deal
This article from Bloomberg may be of interest to subscribers. Here is a section:
Crop traders have been focused for weeks on the approaching deadline of Nov. 19 for renewing the grain-corridor agreement, particularly as senior Russian officials repeatedly criticized the deal, suggesting that any extension would require difficult negotiations. Exports have also been slowed by a swelling backlog of vessels waiting to be inspected as part of the agreement -- Ukrainian President Volodymyr Zelenskiy said some ships had been waiting for three weeks.
Vessel and insurance rates to Ukraine stand to rise, said Michael Magdovitz, a senior commodity analyst at Rabobank. New deals from the country had already been drying up as traders didn’t want to risk getting caught short of the deal’s deadline, said Matt Ammermann, commodity risk manager at StoneX.
Russia, which leads global wheat exports, stands to offset some of the lost sales. Still, it will be key to watch how shipping costs across the entire Black Sea region are affected by the latest developments, Ammermann said.
Eoin Treacy's view - At best this is a fresh example of brinksmanship by Russia in seeking to extract maximum benefit from the uncertainty around secure supply of wheat. At worst it is a prelude to intensifying the unconventional war effort by holding the world hostage with food insecurity.
China's Inward Turn
Thanks to a subscriber for this report from Citi which may be of interest. Here is a section:
In some ways this represents an important generational change in the way China will interact with the rest of the world. As far as we know, the term “international circulation” originated in 1988 when a government researcher, Wang Jian, made the case that China should adopt an export-led growth strategy, making use of its huge surplus labor to plug the economy into the international manufacturing process. In that sense, the de-emphasis of international circulation is an important historical shift. In a People’s Daily article in November 2020, Vice Premier Liu He set out a number of objectives relating to the DCS including: (1) the priority of upgrading of China’s technological capacity, including an enhancement of China’s supply chain resilience (though referred to in this article as “optimizing the structure of supply”); (2) the need for finance to serve the needs of the real economy; and (3) the promotion of further urbanization. Any mention of external demand comes last
Eoin Treacy's view - A link to the full report is posted in the Subscriber's Area.
China’s stock markets are accelerating lower so that is a trend ending signal. The big question for all investors is at what point will the risk premium be fully priced in? The USA’s more aggressive attitude towards China is about the only bipartisan topic in the current administration. In fact the two parties seem to be competing for the mantle of biggest China hawk. China’s response to more activist counterparty risk is to look inwards and many people fear a repeat of the Cultural Revolution is already in play.
The Chart Seminar London November 21st and 22nd 2022
We are living through fast moving markets so the next venue for The Chart Seminar will be November 21st and 22nd this year in London.
In the meantime, if you have any questions, would like to attend, or have a suggestion for another venue please feel to reach out to Sarah at sarah@fullertreacymoney.com.
The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non-EU residents are not liable for VAT). Annual subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.
Eoin's personal portfolio: stock market index short initiated October 26th
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.